Framework for investment decision-making under risk and uncertainty for infrastructure asset management

Piyatrapoomi, Noppadol & Kumar, Arun (2003) Framework for investment decision-making under risk and uncertainty for infrastructure asset management. In RTE Volume, USA, accepted for publication , January 2003 , USA.


A study has been conducted to investigate current practices on decision-making under risk and uncertainty for infrastructure project investments. It was found that many European countries such as the UK, France, Germany including Australia use scenarios for the investigation of the effects of risk and uncertainty of project investments. Different alternative scenarios are mostly considered during the engineering economic cost-benefit analysis stage. For instance, the World Bank requires an analysis of risks in all project appraisals. Risk in economic evaluation needs to be addressed by calculating sensitivity of the rate of return for a number of events. Risks and uncertainties of project developments arise from various sources of errors including data, model and forecasting errors. It was found that the most influential factors affecting risk and uncertainty resulted from forecasting errors. Data errors and model errors have trivial effects. It was argued by many analysts that scenarios do not forecast what will happen but scenarios indicate only what can happen from given alternatives. It was suggested that the probability distributions of end-products of the project appraisal, such as cost-benefit ratios that take forecasting errors into account, are feasible decision tools for economic evaluation. Political, social, environmental as well as economic and other related risk issues have been addressed and included in decision-making frameworks, such as in a multi-criteria decisionmaking framework. But no suggestion has been made on how to incorporate risk into the investment decision-making process.

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ID Code: 27401
Item Type: Conference Paper
Refereed: Yes
Keywords: CRC for Construction Innovation, Program C : Delivery Management of Built Assets , Project 2001-010-C : Investment Decision Framework for Infrastructure Asset management
Divisions: Past > QUT Faculties & Divisions > Faculty of Built Environment and Engineering
Past > Schools > School of Urban Development
Copyright Owner: Copyright 2003 Icon.Net Pty Ltd
Copyright Statement: The Participants of the CRC for Construction Innovation have delegated authority to the CEO of the CRC to give Participants permission to publish material created by the CRC for Construction Innovation. This delegation is contained in Clause 30 of the Agreement for the Establishment and Operation of the Cooperative Research Centre for Construction Innovation. The CEO of the CRC for Construction Innovation gives permission to the Queensland University of Technology to publish the papers/publications provided in the collection in QUT ePrints provided that the publications are published in full. Icon.Net Pty Ltd retains copyright to the publications. Any other usage is prohibited without the express permission of the CEO of the CRC. The CRC warrants that Icon.Net Pty Ltd holds copyright to all papers/reports/publications produced by the CRC for Construction Innovation.
Deposited On: 17 Sep 2009 02:15
Last Modified: 09 Jun 2010 14:00

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